Wednesday, May 24, 2017

Who’s the Client?

Fiduciary Trust International v. Klein, No. A144558 (D1d3 Mar. 21, 2017).

In a trust dispute, a fired trustee declines to give certain documents to his successor, on the grounds that they are subject to the attorney-client privilege. Generally in such cases, the “client” is the office of the trust, not the particular trustee, so a former trustee has no privilege against its successors. There’s an exception, however, for when a trustee obtains personal legal advice about his trusteeship from counsel paid out of its personal funds. The question here is how broad should the exception be and who bears the burden of establishing it.

Based on trust law principles, the court holds that the trustee invoking the privilege must prove the exception and that it applies only when the trustee can demonstrate that it “retained the counsel with whom [it] communicated in a personal capacity and took affirmative steps to distinguish the purported personal advice from advice obtained in a fiduciary capacity.” The court says that the trustee doesn’t necessarily need to go so far as to physically segregate documents (although it’s probably a good idea) but it must take actual steps to identify as privileged communications that are sought from the trustee’s personal-capacity counsel.

Reversed in part for analysis based on the standard in the court’s opinion.

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